One would think that organisations that make the largest financial returns are usually characterised by high entry barriers, non-substitutable products, a large market share, buyers and/or suppliers with low bargaining power, high entry barriers and rare products/services to name a few.
Sure enough, a substantial amount of research supports the importance of these factors in attaining financial success. Then how, against all odds have some of the most successful U.S firms in the past 20 years not displayed any of the above mentioned characteristics? What was the difference that made the difference to them?
The answer is simple: Organisational Culture. (Cameron, C (2004) in Handbook of Organisational Development).
Sometimes unintentionally developed by the original founder or deliberately encouraged by the leadership team to systematically improve the organisation’s performance, organisational culture begins at the top and permeates throughout the organisation.
Leaders are significant role models for the organisation’s culture because what they emphasise and stress is what they attach value to. It is their inferred priorities. It is encapsulated in how they reward and punish, what they do and not what they say. Their personality, leadership and thinking styles ultimately permeate and infiltrate every aspect of the organisation. “Their pathology becomes organisational pathology and their cultural values become a justification of their stylistic quirks.” (Cameron, C (2004) in Handbook of Organisational Development).
Certainly, the first reaction to hearing this simple two-word secret ingredient may be adverse, but let us consider some the effects of culture within an organisation. Organisational Culture defines the organisation’s identity, establishes standards of suitable behaviour and an understanding of organisational operating styles, creates energy and momentum, helps to unite employees of different demographics and helps to keep employees motivated and loyal to the management of the organisation.
Thus, the prevailing culture of an organisation will affect business results as well assist in facilitating the health, morale and productivity of employees. For this reason, many of these more successful companies have chosen to focus on company values, personal beliefs and company vision as opposed to market forces, competitive positioning and resource advantages. The reason being that culture is the “social glue” holding the organisation together (Cameron, C (2004) in Handbook of Organisational Development).
So then why doesn’t every organisation just change its culture? Many different types of organisational cultures exist, and there is no one-stop answer. Different organisation cultures have different effects. However, no one culture is more effective than the other. It is very context dependant. “The problem with trying to change culture is that it is such a vague and amorphous characteristic of an organisation that it is very hard to know where to begin and what to target” (Cameron, C (2004) in Handbook of Organisational Development).
Naturally, the best place to start is the top.